The number of fraud cases reaching courts in the UK rose by 78% in 2018 according to research conducted by KPMG Forensic. KPMG’s Fraud Barometer, which records cases of alleged fraud with a value of more than £100,000, found that 453 cases with a total value of £1.2 billion went to court across the UK last year.
The barometer includes one ‘super case’ (a case involving a sum greater than £50 million), but there are a large volume of smaller value cases between £10 million and £50 million covering areas such as evasion of duty, VAT fraud, investment fraud, loans and mortgages, counterfeit goods, pensions and social benefits.
Commenting on the findings, James Maycock (forensic partner at KPMG) said: “In the round, fraud was a diversified portfolio this year. Fraud levels in the UK continue to rise as criminals look for new ways to exploit both public sector and private sector fraud opportunities. Sophisticated technology and social engineering have become closer to the norm for ‘professional’ criminals. For example, the number of cases of ‘account takeover’ frauds in the Fraud Barometer has more than doubled from 13 cases to 34, with diversion fraud, identity theft and push-payment fraud being the most common methods. Making sure the large, often cross-border and complex frauds go to court is both time-consuming and resource-intensive. This places much more emphasis on businesses and consumers to protect themselves from a growing number of fraudsters who will take advantage given the opportunity.”
Value of insurance frauds
The Fraud Barometer has identified a worrying surge in the value of insurance frauds hitting courts in the last 12 months, with more cases than were seen in the period 2014-2017 combined. Overall, £17 million of alleged insurance fraud appeared in UK courts over 19 cases in the last year, compared to 24 cases with a combined values of £11.9 million in the years 2014-2017. ‘Cash-for-Crash’, personal injury scams and faked death claims featured multiple times in the list of frauds coming to court.
One case saw a man who masterminded a £4 million bogus insurance claim scam jailed for nine years. The scam involved orchestrating 250 collisions with innocent drivers, mainly on mini-roundabouts and making claims against dozens of insurance companies for fabricated injuries or vehicle damage. The presiding Judge in the case was very clear in stating that all insurance customers will pay for the fraud through higher premiums.
Maycock observed: “Insurance fraud has a massive impact on many people: the victims, insurance companies and, of course, everyone else who’s left to pick up the cost through higher insurance premiums. Despite the progress that has been made, particularly so with regard to the number of people now using in-car technology to record events in real-time, fraudsters will continue to come up with new and improved ways to scam the system. Insurance scams are no longer the domain of claiming for a ‘lost’ camera on holiday, but like many areas of fraud have turned into a very lucrative income stream for professional criminals. The increase in professional insurance scammers coming to court goes to show the complexity of the task that the industry is tackling. Fraudsters will move quickly to new methods and exploit any area they can. Staying ahead of them is a difficult challenge for the authorities.”
Eyes on the big prize
In another emerging trend, 2018 saw a large increase in the value of fraud cases coming to courts involving rogue tradesmen. Historically, the majority of fraud cases involving fraudulent repairmen, builders and roofers have been below the £100,000 threshold to appear in the Fraud Barometer, but the value of the frauds taking place in this area is growing rapidly as gangs target the vulnerable for as much as they can squeeze. In 2018, there were 18 cases with a value of £7 million, where mostly elderly homeowners were targeted and scammed out of their life savings.
In one case, a number of cowboy builders, who took turns in defrauding an 83-year-old woman until they had conned her out of her £290,000 home and more than £100,000 in cash, were jailed for a total of 14 years. One of the gang defrauded the woman out of £28,500 for ‘underpinning’, while fake work was done to rafters for £29,000. Eventually, one of the conmen convinced the woman to settle her bill by selling her £290,000 house to him for just £25,000, telling her that she could live in the house for the rest of her life while he took care of it. She had lived alone at the address where she had resided all her life and had been left the house by her parents.
Maycock stated: “While many fraud attacks take place with the perpetrator behind a computer screen and never actually meeting the victim, frauds by rogue traders are perpetrated very much face-to-face, where the fraudster will often meet or be welcomed into the home of their victim(s). It’s often elderly people who are targeted, with many spending their life savings on sub-standard and dangerous work that’s never completed.”
He added: “The personal nature of this fraud often leaves victims feeling very distressed and foolish. Many will never recover either financially or emotionally from the deceit. There are things people can do to protect themselves and their vulnerable friends and relatives from rogue tradesmen. Never part with money up front. Don’t welcome uninvited callers into homes (even if they’ve ‘spotted’ something that needs fixing). Ask for ID and checking if they are registered tradesmen.”
Customs under attack as Brexit looms
Around £89 million of duty evasion was recorded in the Fraud Barometer for 2018. This is the highest value recorded, with the number of fraud cases relating to tobacco products more than doubling in 2018 from 16 to 41.
Cross-border smuggling is also one of the largest fraud types coming to court. The most common goods were counterfeit pharmaceuticals and pirated digital media.
MTIC or ‘carousel’ frauds – ie complex frauds which took advantage of a change in multi-jurisdictional tax laws – have been one of the biggest drivers of fraud recorded in the three decades of the Fraud Barometer, and have cost the UK’s public finances an estimated £25 billion-£30 billion over that period. With new customs arrangements potentially coming into play post-Brexit, the potential for professional criminals and misguided businesses to exploit or abuse untested technology or tax collection mechanisms isn’t insignificant.
On that note, James Maycock observed: “How Brexit will impact fraud levels is yet to be seen, but new systems and new landscapes, such as new tax and customs arrangements, have in the past opened new and lucrative loopholes ripe for the picking by unscrupulous criminal gangs and businesses looking to cut their costs improperly.”